Isabel Schnabel: The quiet erosion of central bank independence
Speech by Ms Isabel Schnabel, Member of the Executive Board of the European Central Bank, at the Fifth Annual Charles Goodhart Lecture, London, 7 May 2026.
Slides accompanying the speech
Central bank independence is at risk. That was the key message conveyed by Jerome Powell at his final press conference, explicitly referring to the "legal attacks" on the Federal Reserve. That a sitting Fed Chair felt compelled to make such a statement publicly says something about the times we are in.
Political attacks on central bank independence are deeply disconcerting. They risk doing lasting damage by sowing doubt about the institution's ability to act free of political consideration, weakening the anchor underpinning long-term inflation expectations.
What makes the current moment particularly concerning is that direct political pressure is not arriving in isolation. It comes on top of structural forces that are quietly eroding the conditions under which independent monetary policy is effective.
Two of these forces will be the focus of my remarks this evening.
The first is the sustained increase in government debt to levels that risk creating a tension between price stability and fiscal sustainability, giving rise to fiscal dominance.
The second is the renewed momentum towards financial deregulation, which by reducing the resilience of the financial system can create the conditions for financial dominance – the implicit need to prioritise financial stability over price stability.
I will argue that preserving central bank independence rests not only on sound legal foundations, but also on robust fiscal and regulatory frameworks that secure both debt sustainability and financial stability, as well as on a clear commitment by central banks to operate within the boundaries of their mandate.